Young adults and low-cost health insurance

Samantha Ames, 25, of Washington, plays with her French bulldog, Harvey, at her home in Washington, on Monday, March 12, 2012. As a teenager, Ames was prone to ankle injuries playing catcher on baseball and softball teams. Last April, she tripped over her mini bulldog and badly injured her left ankle. Ultimately she needed surgery that cost her insurer $30,000. But she considers herself lucky. Only a few months before her accident, Ames had been able to get back on her parents??? insurance, thanks to a provision of the health care law that lets young adults keep that coverage until they turn 26.

Since the Affordable Care Act (ACA) was signed into law in 2010, more than 3 million young adults age 19 to 26 have been able to stay on their parents' health insurance policies, according to the Department of Health and Human Services. But an estimated 16 million to 19 million others are still uninsured.

"Young adults are disproportionately more likely to be un- or underemployed and those that are able to find employment often earn lower wages, all of which limits their ability to access affordable job-based insurance coverage," says Kathleen Stoll, deputy director and health policy director of Families USA. "Because young adults are over-represented among uninsured and lower-wage workers, they will benefit the most from access to financial help for coverage under the Affordable Care Act."

Studies and polls show that young people would sign up for insurance if it were affordable. Few are opting out of the system because they feel invincible and consider insurance unnecessary. "Contrary to common wisdom, studies have shown that most young adults understand the importance of health insurance. They just haven't been able to afford it in the past," says Justin Nisly, spokesperson for Enroll America.

While a Kaiser Family Foundation poll in June showed that 77 percent of young adults consider having health insurance to be "very important," an August survey by the Commonwealth Fund found that just 27 percent of them know that they'll be able to purchase their own insurance in the state-run marketplaces opening for business Oct. 1.

The ACA, also called Obamacare, provides tax credits to help make insurance more affordable to those with incomes that are lower than 400 percent of the federal poverty level ($45,960 per person in 2013); people who earn up to 250 percent of the federal poverty level ($28,725 for individuals) can get subsidies to cover out-of-pocket medical expenses like co-payments. "It is very important that a young uninsured adult make that determination [about whether they qualify for tax credits] because so many will and can use it buy more comprehensive coverage," says Jen Mishory, deputy director of Young Invincibles, a research organization focused on young adults. "They would likely be missing out on a benefit if they do not explore whether they qualify."

The ACA also calls for the expansion of Medicaid to cover childless adults earning up to 133 percent of the federal poverty level (about $15,000 per person), but not all states have agreed to this provision, making access more difficult for low-income residents.

In the state-run health insurance marketplaces, the plans are divided into five tiers: platinum, gold, silver, bronze, and catastrophic. Analysts expect young adults to gravitate towards the bronze and catastrophic plans, which are the lowest-cost options.

Bronze plans will pay for 60 percent of health care costs; the consumer is responsible for the remaining 40 percent. Catastrophic plans are intended to function as a safety net, offering bare-bones protection that should help consumers avoid financial ruin. They're available to people under age 30, and offer very low monthly premiums and very high out-of-pocket costs. Low-income people who'd otherwise have to spend more than 8 percent of their earnings are also eligible to buy catastrophic plans.

Both the bronze and the catastrophic plans cover basic preventative health services including cholesterol tests, immunizations and screenings for depression and alcoholism. Both also cover, to varying degrees, all 10 categories of "essential health services," including hospitalizations, some maternity care, outpatient care, pediatric care, and vision and dental care for children. For those seeking routine care for the lowest cost, the bronze plans may prove a better value because consumers who are eligible for tax credits or subsidies can use them to offset the price. The subsidies and tax credits may not be used to pay for catastrophic plans.

While both catastrophic and bronze plans have a high deductible, bronze plans cover 60 percent of costs even before the deductible has been met while catastrophic plans cover just three primary care visits annually (in addition to basic preventative services). Policyholders with a catastrophic plan must pay out of pocket in full for other services until they have reached the plan's deductible.

The low monthly price of a catastrophic plan may initially be attractive to young adults, but Mishory urges caution.

Consumers should ask themselves, "How high should my deductible be? Do I only expect to use preventive care? Can I afford some of the out-of-pocket costs of a catastrophic plan if I do need unexpected medical services?" says Mishory.